Hong Kong-listed firms 'not ready' for disclosure law
Expert warns firms are unprepared for rules that levy fines for failing to release information
Many Hong Kong-listed companies are not ready for a new disclosure law that came into effect this month, says a corporate governance expert.
The law, effective from January 1, says companies and directors will face fines of up to HK$8 million if key corporate information such as major acquisition or disposal plans, mergers, acquisitions or substantial changes in profit or loss are not disclosed in a timely fashion.
The legislation followed more than 10 years of debate and was designed to put market transparency in Hong Kong on par with international standards.
Prior to the law's introduction, companies that failed to disclose such information would only be reprimanded for breaching listing norms. The fine was brought in to add teeth to the existing regulation.
Patrick Rozario, director and head of risk advisory services at accounting firm BDO, said his study showed that many firms were not ready for the new law and that less than half of the companies had suitable internal procedures to properly handle corporate disclosures.
"In the US and Britain, most companies have in place procedures and systems to make sure their corporate information is disclosed in a timely and fair manner, but it's not prevalent in Hong Kong," Rozario said.
According to BDO's seventh annual study on corporate governance, which covered 241 listed companies, 13 per cent of mainland-listed companies, 36 per cent of mid-cap companies and 51 per cent of Hang Seng Index constituent companies had no such procedures in place by the middle of last year.
